Delhi warehouse deals turning negative after full expenses

[LuckyTimber]

I would like one of these Delhi warehouse purchases to produce defensible income from the outset, but the numbers around ₹95,190,000 do not survive my full cost model with finance at 7.52%. Allowing for empty periods, management, repairs, insurance and property tax pushes the projected cash position below zero.

I am trying to work out whether the market response is lower leverage, a lower purchase price or acceptance of a thin initial return. The calmer way to test it may be to calculate operating income before debt, confirm which expenses the lease can recover from the tenant, and then stress-test downtime and work between occupiers. I would welcome comparable assumptions, with Indian legal obligations kept distinct from an individual investor’s willingness to take risk.

 

[anika_vale]

First strip out financing and calculate the property’s net operating cash flow. If that is unattractive before debt, adding equity only hides the financing problem; it does not improve the warehouse economics. If the unlevered result works but debt makes it negative, test lower leverage and interest-rate sensitivity. What lease costs can actually be recovered from the tenant?

 

[LuckyTimber]

That distinction helps. The unlevered figures are not uniformly bad, but they become thin after a realistic vacancy allowance and maintenance reserve. I have not treated property tax, insurance or management as tenant recoveries unless the proposed lease clearly supports it. The biggest unknown is turnover: downtime plus work needed before a replacement tenant moves in.

 

[PlainStory]

I would not automatically apply the same management percentage used for residential property. A warehouse with one stable tenant may require less routine management, although a vacancy can create a much larger leasing task all at once. Model management during occupancy and reletting costs at turnover separately. Otherwise one broad percentage can be either too pessimistic or far too optimistic.

 

[photosAndPath]

I partly disagree with the idea that more equity merely hides the issue. It can be rational if the buyer values resilience and the unlevered return meets their target. The mistake is calling reduced debt a better deal rather than a different capital structure. Compare all-cash, moderate-debt and 7.52% financing cases, then ask whether the return justifies tying up that much equity.

 

[paper.warm]

The lease expiry profile matters more than a generic annual vacancy number. A long occupied period followed by several empty months produces a different financing strain from smoothly averaging vacancy every year. Run a monthly scenario around lease end, including lost rent, maintenance while empty, marketing or management costs, and any tenant-ready work. That will show whether cash reserves, not average yield, are the constraint.

 

[StillDoor]

On the legal-versus-risk point: verify title, permitted use, lease enforceability, taxes and required insurance with advisers familiar with the specific Delhi property and transaction. Those are due-diligence matters, not optional cushions. Vacancy allowance, reserve size, acceptable leverage and how long you can carry an empty building are investor choices. Keeping those columns separate should make comparisons much cleaner.

 

[buildTheRoof]

Waiting is also a valid outcome. A spreadsheet does not need to be forced into approval because the asking price is ₹95,190,000. I would request the existing lease, actual operating bills, property-tax records, insurance quote and maintenance history, then rebuild the model from those. If the seller’s headline yield depends on excluding recurring costs or assuming uninterrupted occupancy, the price must compensate.